Down goes the Dow

Maserati,

Your view is similar to what was included in the article I posted. Unfortunately just watch CNBC or Bloomberg on any given earnings day and you will see the large number of highlighted "adjusted earnings beats" (non-GAAP earnings). It is pure BS and most who post here have no clue to how inaccurate and deceiving those numbers are. When the market breaks the third bubble in this century non-GAAP earnings will be a topic that becomes "rediscovered," but was there all the time.

Igy

agip, more on "malinvestment", and more on my comment on value:

As Soros is quoted on a wikipedia page, "Mr Paulson's proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information. The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up with the dregs. The proposal is also rife with latent conflict of interest issues. Unless the Treasury overpays for the securities, the scheme would not bring relief."

Government policy, picking winners and losers by subsidizing some and not others.

This refers to the reverse auction and the asymmetry of information. Like Soros has said, the idea was good, but wasn't worked out properly. It was investment, but malinvestment.

"Unless the Treasury overpays for the securities, the scheme would not bring relief."

The critical part that must be understood. It's difficult to articulate, but true.

BTW I don't like Soros' politics, but he's not a complete idiot, either.

"Some stock market pundits are highly critical of companies that repeatedly emphasize "adjusted" (also known as non-GAAP or pro forma) earnings over GAAP earnings.

However, income statements reported based on GAAP don't always reflect the ongoing performance of a companies underlying operations. For example, a company may write-down an asset or restructure its organization. These actions usually come with large one-time costs that distort company profits."

Abuse more common in non-GAAP than missing a benefit in GAAP.

Igy

Proof?

LNKD, NOW, CRM, FIT, TWTR, GPRO, TSLA, DATA, SYSS.....

Pull their 8Ks and have a look for yourself rather than be led around by your nose ring.

Igy

Davie,

That statement is such a joke. Most analyst use non-GAAP, pro-forma because it creates a positive narrative. Non-GAAP sure worked out well for LNKD. Drop Robert Schiller, Noble Prize winner a note and tell him he needs to change his metric for EPS to non-GAAP accounting. It would be good for a laugh.

Igy

Davie,

You have no comparable standard under non-GAAP. Alcoa has been writing off asset losses as one time items for years. The abuse of not including stock based compensation is an all to familiar occurrence among the technology sector.

Igy

The issue of non-GAAP is a real one. It is definitely used to support a positive narrative, but that's not a problem if the underlying reality is indeed positive.

IMO a sort of normalized GAAP would be most interesting, as it would take into account not only one year's "one-time charges and writedowns", but those of multiple years--and multiple years of "normal" activity, as well.

I know the normalization I have in mind, but I can't recall it at the moment.

Anyway DJIA at around 16.4k late Friday afternoon. See you all on Monday morning

Igy

Not sure why you have to be so binary

Sure companies and analysts abuse proforma type reporting, and you are right to condemn that.

but

you should be able to agree that issue of non-cash writedowns is real. If a company writes down an asset...it wrecks GAAP earnings once and only once...so if you are trying to value a company for its future earnings...using GAAP earnings can be misleading. The writedown won't happen again.

You can agree to that, no?

agip,

More often than not non-GAAP earnings hides poor management and expenses that are a real cost of doing business. As outlined in the article I posted there are other ways to highlight one-time items that are truly one-time.

Igy

Talk about avoiding the question.

POTO,

There is no avoiding of the question, I just don't agree. If I remember my debits and credits from my accounting classes it is a very simple answer. The one- time items have been serially misused to gloss over companies making bad decisions. If I buy asset at X and it goes to Y, that is its value, whether it is a plus or a minus. What about the tax benefit from the loss? I guarrantee that if is a plus it will never be a one-time item.

Igy

If you disagree, then say so. Agip brings a lot to this thread and deserves to be respected. He doesn't deserve your usual run around.

POTO,

I agree that agip brings a lot to the thread and if the implication was to disparage him or his comment I apologize. I was in a hurry to leave the office and make my barber appointment. Yes I go to a barber and not a stylist.

Have a good weekend.

Igy